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Expressways and policy choices of local governments

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  • Xing, Jing
  • Tam, Eddy H.F.

Abstract

We examine how intercity road connection affects the policy choices of local governments, using the construction of China’s national expressway as a natural experiment. We show that peripheral counties reduced the level of spending and changed the spending composition since the expressway connection. They became less involved in spending competition, increased the effective tax rate on private firms, and slowed down the privatization of state-owned firms. These results are consistent with the view that mobile capital tends to relocate from peripheral areas to core regions with a lower trade cost. We further show that such changes in government policies contribute significantly to the output decline in these regions after the expressway connection.

Suggested Citation

  • Xing, Jing & Tam, Eddy H.F., 2024. "Expressways and policy choices of local governments," European Economic Review, Elsevier, vol. 168(C).
  • Handle: RePEc:eee:eecrev:v:168:y:2024:i:c:s0014292124001442
    DOI: 10.1016/j.euroecorev.2024.104815
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    More about this item

    Keywords

    Local governments; Transportation; Infrastructure;
    All these keywords.

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis

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